Why are stablecoins the best track for blockchain implementation?

On September 18, 2025, Liu Honglin, founder of Shanghai Mankiw Law Firm, was invited to speak at the Shanghai-Hong Kong Stock Connect Web3 Digital Asset Conference on global stablecoin regulatory trends and compliance development. This article is a transcript, with some content edited.

I saw many old friends at the conference today and was very happy to have this opportunity to talk with you about the hottest tracks and directions in the current Web3 industry.

The previous three speakers focused primarily on the RWA track and how to address issues related to emerging cross-border financing or asset tokenization. Today, I'd like to discuss Web3 from its roots, the origins of RWA, and the crucial impact of stablecoins and cross-border payments on the overall Web3 construction and compliance exploration. Before I stood here, I was worried I wouldn't be able to share some of today's topics. But I saw President Wang just mentioned how friends bought Bitcoin over a decade ago. So, I think there are some things we can still share. We all know that the Bitcoin white paper is the starting point of Web3. The Times once reported, "The Chancellor of the Exchequer is once again on the brink of rescuing banks," a statement that captures Bitcoin's original aspirations. As an emerging asset or currency in the digital age, Bitcoin aims to build a complete decentralized system, disrupting the traditional bank-dominated payment system. However, by 2025, the undeniable reality is that Bitcoin's original purpose has changed. It's no longer the payment tool it was originally envisioned to be, nor has it departed from its original role as an internet currency system. Today, Bitcoin has become an alternative investment target in the capital market and even a strategic reserve asset for some countries. For high-net-worth individuals, it offers a hedge against risk in asset allocation; for the capital market itself, it serves as the underlying asset for numerous ETF products. While Bitcoin's core positioning has shifted from a decentralized payment tool to an alternative investment, the value of the blockchain technology behind it remains undimmed. Especially when applied to cross-border settlement and transfers, its efficiency and convenience remain unmatched by the traditional financial system, even today. Stablecoins Take Over Bitcoin's Payment Mission So who has taken on the payment mission Bitcoin left unfulfilled? The answer is stablecoins. The global stablecoin market capitalization currently stands at approximately $270 billion, 60% of which comes from Tether (USDT). Industry insiders are well aware of its operating principles. Simply put, it's a point-based system for currency/deposits, like "digital points redeemable at a 1:1 ratio." If you deposit one yuan (whether in RMB or USD) with a listed company, the company will issue you one point of the corresponding value. These points can be freely used and redeemed on-chain, and can be redeemed later. The underlying logic relies on blockchain's efficient storage and asset transfer technology, but it differs fundamentally from Bitcoin: Bitcoin is completely decentralized; if you hold the private key, you truly own the asset. Stablecoins, however, are fundamentally commercial services. Even if you hold the private key, the corresponding assets may not be entirely yours. Issuers like Tether have the ability to freeze your assets. Let me share a real-life case that happened just yesterday: a netizen contacted me for help. His on-chain wallet had received 100,000 USDT in suspected gray funds, but the entire 1 million USDT in the wallet was frozen. This situation is much more complex than with traditional banks. With a bank, you can contact your account manager to unfreeze the funds, but with global law enforcement agencies, it will take at least six months for his frozen 1 million USDT to see any meaningful progress. It is precisely because of these financial security risks that Hong Kong is prioritizing stablecoin compliance, and the national government is also paying close attention to the regulation of stablecoin issuance. Why are stablecoins so popular? Some may wonder why stablecoins have grown so rapidly in just over a decade. In 2024, their transaction volume even surpassed Visa's. The core reason is simply two words: efficiency. Let me give you two personal examples: I recently transferred money from a mainland bank card to a Hong Kong bank card under the same name, and it took two full days for the money to arrive. Later, I checked Alipay's cross-border transfer service and found a minimum fee of 100 RMB. Even if I was only transferring 10,000 RMB, I still had to pay this 100 RMB. In traditional cross-border payments, "T+1" arrival times and "fees of several dozen US dollars" are the norm. But what about the blockchain world? Whether you're transferring $0.1 or $100,000, mainstream public chains typically see the funds arrive within a minute or two, with minimal costs. The BSC chain even offers zero fees, while other mainstream public chains only charge around $0.03. Judging solely by transaction costs and efficiency, stablecoins offer at least a tenfold improvement over traditional payments. Therefore, from an industry and sector perspective, stablecoins will undoubtedly be a key component of Web3's most commercially valuable applications by 2025. Another interesting phenomenon: the penetration of stablecoins in emerging countries and regions is actually faster than in Europe and the United States. This reminds me of China's internet development: we skipped the desktop PC era and entered the mobile internet era. Why? Back then, many people couldn't afford computers and didn't want to run Ethernet cables, considering them too cumbersome. However, manufacturers like Xiaomi pushed smartphone prices down to under 1,000 yuan, significantly lowering the barrier to entry for mobile internet users and rapidly transforming ordinary people into internet users. This represents an industry leap. The same is true for stablecoins. Modern financial services and infrastructure in China, Europe, and the US are so convenient that people don't feel an urgent need for change. However, in regions like Africa, South America, and Southeast Asia, where financial infrastructure is underdeveloped, stablecoins have become a very accessible option. In areas without convenient cross-border payments, and with 1.7 billion people globally without bank accounts, stablecoins directly address their financial inclusion challenges. For example, when traveling to Central Asia and South America, you'll see local vendors and waiters displaying signs saying "Welcome to USDT/USDC." For them, stablecoins are a globally accepted currency with no risk of devaluation, serving as both a payment method and an asset store. In an interview last year, the founder of Tether mentioned that they are deeply concerned about this "non-mainstream market." Nearly 2 billion people worldwide rely on companies like Tether for payment solutions. Therefore, from the perspective of financial inclusion, stablecoins and cryptocurrency payments are crucial components of the global payment landscape. The ultimate user of cryptocurrency may be AI. Of course, in the Web3 world, there are numerous application scenarios like DeFi, which require support from programmable virtual currencies. We've recently been engaging in in-depth discussions with numerous partners in the AI ​​field, and we've reached a consensus: the true core users of cryptocurrency, or the core users that enable large-scale adoption, aren't real people like us, but AI. Why? The core reason cryptocurrency hasn't seen widespread adoption over the past decade is its poor user experience. Remembering private keys, managing authorizations, and navigating a mountain of incomprehensible smart contracts are incredibly inconvenient for the average person. But AI is different; it precisely adapts to the programmability and complexity of cryptocurrency. We often joke about "embracing AI on one side and Web3 on the other." The core of the next-generation internet (Web3.0) is essentially the combination of AI and blockchain technology. This resonates perfectly with what the panelists just shared. The value of stablecoins was once greatly underestimated. Domestic investment institutions and practitioners began to sense the enthusiasm for stablecoins around June of this year. Hong Kong passed stablecoin regulations at the end of May, and Circle went public in early June. In less than a month, Circle's stock price increased tenfold. It was then that people realized that institutions like Baidu, Everbright, and Shanghai Wanxiang had already invested in Circle's stablecoin as early as 2015, demonstrating that the value of this sector had been significantly underestimated. So, in June and July of this year, I visited numerous brokerages, banks, and asset management firms, discussing the business logic and industry chain opportunities surrounding global stablecoins. Everyone is eyeing this investment opportunity. After all, the advantages of stablecoins in cross-border payments are undeniable. From a commercial perspective, the profit model for stablecoins is already very clear, and the profit margins are substantial. For example, a stablecoin issuer like Tehter generated $13.7 billion in profits last year with fewer than 200 employees. In contrast, traditional payment giant Visa, with over 30,000 employees worldwide, generated $19.7 billion in profits last year. Based on this trend, we estimate that stablecoin profits are likely to surpass Visa's by 2025. For this reason, traditional financial institutions like Visa are actively investing in cryptocurrencies and are even officially participating in Web3 conferences. The development of stablecoins has had its ups and downs. Of course, the development of stablecoins hasn't been smooth sailing. Over the past decade or so, we've seen currency-collateralized stablecoins (e.g., issued with bank deposits or bonds), over-collateralized stablecoins on Ethereum, and algorithmic stablecoins that were once popular but ultimately collapsed. It wasn't until 2024-2025, with the EU, the US, and Hong Kong successively introducing practical compliance plans, that the industry truly entered the mainstream, compliant, and commercialized markets. Now, global regulators are gradually reaching a consensus on stablecoin risk management, such as requiring full reserves and independent custody. This requirement is not without purpose. Previous cases have shown that Tether's cash reserves only account for 3%, with the remainder held as long-term investment reserves or other types of reserves. Furthermore, there are instances of user funds being commingled with funds on other exchanges. These represent significant and visible financial risks, and we understand the stances and opinions of international regulators. From a compliance perspective, we generally advise clients to exercise caution when engaging with algorithmic stablecoins. Under the current regulatory framework, it is difficult for such products to obtain compliance licenses. Interest-bearing stablecoins, another type of stablecoin, also face compliance challenges. When users hold interest-bearing stablecoins, they can benefit from returns generated by US Treasury bonds or underlying assets. Late last year, a similar project launched by a former French parliamentarian garnered significant initial attention, but fell into a death spiral within three months. This type of product also faces regulatory challenges. This is why both Hong Kong and the US define stablecoins as payment instruments rather than investment products. Their core purpose is to mitigate risks. Entrepreneurs, don't panic! The industry chain offers a promising future. A sobering reminder: Stablecoin issuance is already a game for giants. After the introduction of Hong Kong's stablecoin regulations, many domestic companies have expressed their intention to apply for issuance licenses. However, Hong Kong regulators have also urged caution, stating that stablecoins lack investment value. However, I don't believe stablecoins lack investment value. Cryptocurrency investors who invest in stablecoins have outperformed at least 80% of investors. Why? Because they at least avoid capital loss and massive volatility. Of course, this is just a joke, but it's true that the companies currently able to issue stablecoins are giants like Standard Chartered Bank, Ant, and JD.com. However, this doesn't mean ordinary entrepreneurs have no opportunities. Within the stablecoin industry chain, asset custody and application scenario services represent promising new opportunities. For example, there are companies specializing in stablecoin crypto payment solutions for the gaming industry, cross-border payroll solutions, fiat currency and cryptocurrency gateways, B2B cross-border acquiring, and cryptocurrency bank card startups focused on individual customers. Web3 still offers numerous business opportunities worth considering: In the B2B cross-border acquiring sector, cryptocurrency payment channels are being added to traditional bank accounts, allowing merchants to receive cryptocurrency and exchange it directly within their accounts. This is a classic application of cryptocurrency technology, and the operation is completely seamless for users. Currently, the top ten cross-border payment institutions in China are actively developing related businesses in Hong Kong and Singapore. PayPal is a typical example. PayPal merchants and users only need to pay in local fiat currency, and local service providers will directly convert the fiat currency into a local, compliant stablecoin within the network. After the stablecoin is transferred to the recipient's account, it is further converted into the fiat currency of the recipient's region, completing the funds flow. The cryptocurrency bank card for individual customers (commonly known as the USDT card) is designed to meet users' daily spending needs with USDT while mitigating the risk of bank card freezes due to virtual currency transactions. Simply put, it's an integrated cryptocurrency account function built on top of a personal bank account. Users can top up their accounts with USDT and other cryptocurrencies. From then on, when making purchases offline globally, even if it's just buying a cup of coffee at the Starbucks next door, simply presenting an Alipay or WeChat QR code will ultimately debit the funds in their account's cryptocurrency. This is one of the hottest sectors in the industry this year and a key focus for many domestic companies and entrepreneurs. Finally, let's return to the topic of RWA. I've always believed that stablecoins are extremely important to RWAs. I often jokingly say, "RWAs without stablecoins are just rogues." Why do I say that? Because truly valuable RWAs in the future must meet two core criteria: First, business data must be "end-to-end on-chain." If an RWA project's data isn't uploaded to the blockchain, it's difficult to prove its authenticity and credibility. Data fidelity is the foundation of RWA. Secondly, it must be able to automate contract execution and distribution through smart contracts. The core value of blockchain is "programmability" and "trustlessness." Only by automatically distributing a project's operating profits to stakeholder accounts through smart contracts can trust and operating costs be significantly reduced. Currently, Hong Kong's RWA model has a drawback: offshore financing requires a guaranteed return of 8%-10% and a service fee of 3-5 million yuan, which directly excludes small and medium-sized enterprises. However, only when stablecoins are implemented in compliance, data is uploaded to the chain end-to-end, and smart contracts automatically distribute value can RWA truly break through financing limitations and release commercial value. This is also the core support role of stablecoins for RWA.